Latest Estimate of Potential ESOP Universe

Posted by Aaron Juckett, CPA, CPC, QPA, QKA on Thu, Jan 20, 2011
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Over the years we have shared estimates of the Number of Baby Boomers, Baby Boomer Business Owners, and the Potential ESOP Universe. Last year the NCEO suggested the number was around 400,000. Trends in Employee Ownership: Important Demographic Developments explores some of the trends, citing 150,000 to 300,000 business that may be well-suited for an ESOP in the next few years:

That's why fundamental demographic trends are so significant. The best estimates are that there are 78 million baby boomers in the U.S. (people born between 1946 and 1964)...These individuals, well along in life and career, have amassed over $13 trillion in assets — about 50 percent of the total held by all Americans. And a good portion of those assets takes the form of privately held businesses. According to the U.S. Census Bureau, there are approximately 6 million businesses with employees. More than half of these businesses are owned by boomers — who will want to unload those firms as they retire.

The Federal Reserve estimates that in 2008 — the first year that the oldest baby boomers officially hit 62 — nearly 500,000 of these businesses were put up for sale. In the next few years, predicts Kiplinger Business Resource Center, the annual rate of firms put on the market will rise to 750,000. Others estimate as many as half of privately held companies in the U.S. will change hands between 2011 and 2020.

In short, a staggering number of private-company owners will be looking for liquidity over the next 10 to 15 years. As a result, ESOPs will begin to show up on the radar screens of many of these owners and their professional advisers. Of course, for a variety of reasons, many of these firms will not be good candidates for an ESOP. They may simply be too small or the owner may play an essential, irreplaceable role in the business, leaving it non-viable once the owner has exited. Still experts estimate that in the next few years there will be 150,000 to 300,000 businesses that baby boom owners may want to liquidate and that are very well-suited for the ESOP-based exit strategy.

Topics: Studies and Statistics, ESOP, employee stock ownership plan

Aaron Juckett, CPA, CPC, QPA, QKA
Written by Aaron Juckett, CPA, CPC, QPA, QKA

Aaron is President and Founder of ESOP Partners and provides implementation, administration, and consulting services to hundreds of companies. He is a member of The ESOP Association (TEA) and the National Center for Employee Ownership (NCEO).

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